Analysts have various viewpoints about Dubai’s recent declaration of a 20% tax on foreign bank revenue. Some argue that international banks may boost costs in response to the levy, passing on the higher cost to customers. On the other hand, there are indications that some banks may prefer to absorb the tax burden in order to remain competitive.
According to experts, a 20% tax on foreign banks in Dubai intends to match the ‘old’ Emirate-level Corporate Tax regime with the newly implemented 9% Federal Corporate Tax regime and provide an opportunity to reduce double taxes.
According to the UAE Central Bank, there were 61 licensed banks in the UAE as of the third quarter of 2023, 22 of which were national banks and 39 of which were international banks.
“Foreign banks operating in Dubai were already paying a 20 percent Emirate-level tax on profits, so the new law does not represent a significant change in Dubai’s tax landscape of foreign banks and is more aimed at aligning the ‘old’ Dubai Emirate-level Corporate Tax regime with the newly introduced (9 percent) Federal Corporate Tax regime, which was the main purpose of the Dubai government,” said Renan Ozturk, senior director of indirect taxes and the taxation at the Middle East Financial Services Authority.
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